Friday, June 14, 2013

Sold ICU Medical, Inc.

I sold my position in ICU Medical, Inc. (Ticker: ICUI) today at $73.99 generating a net gain of 3.48% over an 8 day period (156% annualized return). It looks like ICU Medical rejected an $80 bid from CareFusion (Ticker: CFN). Apparently ICU Medical is looking for something in the 9’s, which I think will be difficult. I don’t see private equity bidding that high and CareFusion may just walk away as it has other targets in mind.

Edit: I also sold my position in ThermoFisher Scientific, Inc. (Ticker: TMO) at $85.55 and just breaking even on the trade. The stock is not acting well after the secondary offering. Raising some cash here and re-evaluate things a bit.

11 Comments:

Hi Money Turtle,What do you think of Cooper Tire (CTB)? Apollo Tyres (an Indian co.) announced it is buying them for $35 per share. Do you think it is likely to go through? The news release expects a completion in the 2nd half of the year. When would you estimate that means? Would that be the end of the year? At the current price ($31.15) it produces over a 12% return.Do you think it is a good opportunity at this price?

Widening credit default swap (CDS) spreads on Cooper Tire & Rubber are signaling growing market concerns over the company's credit health, according to Fitch Solutions. Five-year CDS spreads on Cooper have widened 35% since June 12 as the market reacted to news that India's Apollo Tyres Ltd. will buy the U.S. tire manufacturer for $2.5 billion.

Cooper CDS spreads had been widening consistently for a month leading up to the announcement. The price of credit protection on Cooper is now aligned with 'B-' rating levels, just one notch below its CDS implied rating or historical trading pattern. Credit markets are clearly worried about the additional debt burden that will be placed on Cooper as a result of the planned buyout.

CDS liquidity signaled credit concerns as early as September of last year, a month before rumors of the potential buyout surfaced. According to Fitch Solutions' CDS Liquidity Score Model, CDS on Cooper went from trading in the 14th global percentile on Sept. 3, 2012 to trading in the second percentile (or with more liquidity than 98% of single-name CDS) on Sept. 20, 2012. Despite some variance in liquidity since that time, CDS referencing Cooper have continued to trade within the fifth global percentile thus far in 2013, signaling ongoing uncertainty surrounding the company's credit prospects."

Elan [NYSE:ELN] is seeking a fast-track sale process after spending four months under siege from Royalty Pharma, a source close to the situation said. The Irish pharma has created a virtual data room in anticipation of due diligence starting in the next few days, the source added.

The public nature of its battle with Royalty Pharma means a lot of information has been disseminated in the market. As a result the company will go through the sale process as quickly as possible, said the source. There is little need for elaborate bidders’ information memoranda (IMs) and the process will not likely follow a first-round, second-round format, said the source.

Elan is a relatively simple business due to its lack of pharmaceutical pipeline and failed transactions, the source said. On top of its lucrative rights to multiple sclerosis drug Tysabri, its cash position, and tax advantages, Elan owns 18% in its Prothena neotope drug discovery unit, and 48% in Newbridge Pharmaceuticals and its investigational treatment for bipolar disorder ELND005,

Royalty Pharma remains interested in Elan and believes it is the most logical buyer despite officially lapsing its rejected potential USD 15.50-per-share offer today. The US investment vehicle withdrew court proceedings on Tuesday against the Irish Takeover Panel, which had refused to let it change the conditions of its offer.

Under Irish law, a failed bidder would normally be blocked from making a return bid for 12 months, but Elan has invited Royalty Pharma to participate in the sale process. Royalty Pharma can participate or it is allowed under Irish law to launch a competing offer if a rival makes a firm bid, the source said.

George Lloyd , Royalty’s executive vice president of investments, said the company would speak to its advisors about whether or not to participate in the process but stressed the investment group was still very much interested in acquiring Elan. Lloyd added that his firm had already spent a lot of time and effort on Elan and indicated it was not prepared to abandon its bid attempt. As of today, Royalty has not been contacted by Elan’s financial advisors to take part in the process, a person close to Royalty said.

Lloyd said that Elan was a pure financial asset and made the most sense for a royalty group like RP which has expertise in maximizing value. The success of the sale process remains a hard call for the sector bankers, who said that Elan was not a natural asset for many big corporates. The third banker said Royalty Pharma remained the most natural buyer for Elan as it required financial engineering.

Elan values its cash at USD 3.65 per share and the underlying value of Tysabri at between USD 11.85 and USD 17.15. Analysts at Jefferies have said Elan’s corporate tax structure is worth USD 3 per share to corporate suitors. The Irish group’s 2012 annual report revealed Irish deferred tax assets of USD 335m, which Elan said would likely be used this year against Irish taxable income arising from its Tysabri divestment, and accumulated Irish unused tax loss carryforwards of USD 2.61bn.

The ELN article exceeded your 4,000 character limit. Can you update your blog to tell a user how many total characters they have when the error message comesup. This would make it easier to edit.

ELN story continued...

"On top of these tax benefits, US mid-sized corporates could be eyeing Dublin-based Elan to take advantage of the Irish group’s low-tax domicile status. The sector bankers said the Irish tax base would be of most interest to a US corporate, particularly with a lot of “dead cash” profits offshore that could be used to fund an acquisition.

Lloyd and the source close to the situation said that any competitive bid tension would lie on the value potential corporate bidders ascribe to Elan’s tax assets and Irish domicile. For its part, Royalty Pharma ascribed little value to Elan’s tax assets in March and said that the maximum value of Elan’s USD 1.5bn net operating losses was USD 187.5m.

Three sector bankers raised the possibility of Forest Laboratories [NYSE:FRX] being a potential interested party in Elan. One banker noted Forest already has manufacturing ties (and profits) in Ireland for depression drug Lexapro, therefore this could make sense as the CEO is stepping down at the end of the year. Two of the bankers also tipped Amgen [NASDAQ:AMGN] as a potential buyer. US-based Vertex (NASDAQ:VRTX) could also make sense as its chairman is ex-CEO of Irish-domiciled Shire [LON:SHP], with experience capitalizing from this business model.

The source close and the third banker discounted Biogen [NASDAQ:BIIB] as a potential buyer. Biogen acquired the remaining rights to Tysabri for USD 3.25bn from Elan in February and was previously tipped as a suitor at the time of Elan’s neotope spin-off."

OPTR stock price was very positive today with volume. Nice looking candlestick chart. Some activity in after hours trading but it may be triple witching related. Hard to tell. I can find no news although sometimes you wonder if someone is acting on information not made public yet. The shorts have more to worry about than anybody else.

In regards to ELN. A while back when I read this article about Royalty Pharma (private company), I was impressed with the founders background. Legorreta really wants to buy ELN and will find a way to make it happen.

"Legorreta pioneered the drug royalty business in 1996 with the founding of Royalty Pharma, which now has $1.4 billion in revenue and a 96 percent profit margin, according to company documents. It focuses on buying royalty streams of drugs for critical care and life-threatening diseases."

About Me

I have a passion for the stock market. I primarily focus my research in the life sciences. I have degrees in Bio and Finance (not that it means much since investing is more of an art than a science). My MBTI personality type is ISTJ. I'm a Generation X'er and was born the year of the pig.